RM Online - Understand 'value-added' and you can really build your competitive advantage

Value-added services are everywhere. The dealership where you take your car for servicing has free loaner vehicles. The manufacturer of disposable contact lenses now gets them to you via second-day air. The theater in your community has a two-for-one deal.

Perhaps you have tried a value-added program. Is it working as you intended? Bringing in new customers? Helping you hold on to existing ones? Giving you a leg up on the competition? Or has it been merely a pain to deliver, draining you of profits and causing complaints from customers who see it not as a nice extra but as a given?

To win value-conscious buyers, you need to lead the value-added services race in your industry. Here are six guidelines for planning and implementing new services:

1. Don't confuse your definition of value with that of your customers. Adding the wrong value is easy to do. Instead of adding value, you end up adding something that isn't perceived as such by the customer. The leader accurately interprets what the customer's needs are - through customer surveys, focus groups, one-on-one interviews, etc.

2. Figure out what business you're really in. Smart companies don't compete; they out-think and out-innovate the competition by adding unique value. But you must know what business you're really in. McDonald's is in the business of entertaining kids, and giving moms and dads a break. Take time to figure out what business you're in. Your business may be solving a problem or creating an experience.

3. Rethink your customer's "highest need." It's easy to believe that the services you assume are important to customers are really not that important at all. United Parcel Service assumed that on-time delivery was the big concern of customers, so the operative word became speed - and rushed drivers. But when UPS began asking, it discovered that what customers really wanted was more interaction with drivers. If drivers were less harried and more willing to chat, customers could get some practical advice on shipping. Result: UPS now allows drivers an additional 30 minutes a day to spend strengthening ties with customers.

4. Develop new ways to listen to your customers. Norm Brinker is a restaurant guru who likes to pose as a confused tourist outside his own and other restaurants. He asks departing patrons if they were happy with their meal. "You have to listen to customers on an ongoing basis," Brinker says.

5. Brainstorm unusual ways to add value. F.D. Titus & Sons, a City of Industry, Calif.-based distributor of health care supplies and equipment, believes that if you're going to develop effective value-adding services you have to first "get out of the box." Titus is referring to the crush of meetings, deadlines, emergencies and other distractions that keep managers from being as creative as possible, and then thoroughly thinking through an idea. Look for ideas you can borrow from other industries, other businesses that are successful in coming out with customer-pleasing programs.

6. Figure out the life span of your proposed value-added service. Before you change or add a new service, anticipate which ones will provide an advantage and how long you can count on having that advantage before competitors neutralize it with their own. New services can be expensive initially, and often customers are slow to respond to them.

Creating and implementing value-adding services will sharpen all of your skills as a leader, your sense of where your industry is going, and your ability to sell your vision to your people so that they can sell its value to customers.